Irked by Australia, Hollywood Wants Retaliatory Action By David Crowefrom the Australian Financial ReviewMay 26, 1999

Behind the cameras in Hollywood, anger over job losses and production cuts is building into a political crusade... and Australia's film industry is one of the targets.

Californian film and television workers have hit back at foreigners they say are poaching big-name movie productions, raising State Government support for tax incentives they hope will keep films at home.

Their fight will escalate in the coming days as the California State Assembly prepares to pass two new laws that would subsidise labour costs on film and television productions kept in the State.

"We know that it will start to turn things around," said Ms Olivia Nagel, spokesperson for the Film and Television Action Committee (FTAC).

Despite solid growth in domestic box-office takings to $US6.9 billion ($10.6 billion) last year, Hollywood has begun talking of a `mini-recession' as productions move away. Hardest hit are crew jobs behind the camera, while big-name actors enjoy ever-higher salaries. The $US160 million box-office success of The Matrix ~ filmed in Sydney for half its estimated US cost ~ has turned the focus on Australia. With Mission Impossible II now in production in Sydney and the next Star Wars film shooting in Sydney next year, Australia's share of Hollywood's production work is sharply growing.

"It was clear to us why there wasn't any work around ~ because foreign governments were prepared to write cheques to persuade producers to go there," Ms Nagel said.

The surge in "runaway" productions cost California 122,800 jobs last year, according to research presented by the FTAC to the Californian State Assembly last Tuesday. Those jobs were mainly short-term tasks on specific projects, but the point was clear to State politicians.

Canada is the primary culprit, according to lobbyists. The FTAC report concluded that 73,750 feature film jobs were lost on 59 movies that shifted to Canada last year, while 18,750 jobs were lost to the UK and 11,250 to Australia.

Other reports also show job losses. The Los Angeles County Economic Development Corporation found that 11,000 permanent jobs were lost in the film industry between 1997 and 1998.

Ms Nagel said there were now 26 nations offering tax incentives to draw film and television production away from the US, but while Canada's tax incentives take up 26 pages in an Ernst & Young tax guide, Australia's take just one page.

Already supported by Assembly speaker Mr Antonio Villaraigosa, the two tax incentive bills are expected to be passed on Tuesday or Wednesday and sent to the State Senate.

One bill would pay a 6 per cent tax rebate on labour costs for small productions, while another would pay a 10 per cent rebate on all television, film and commercial productions.

Revised by committee over the next few months into a single bill, the measures are likely to be signed into law by the State Governor, Mr Gray Davis, by September. The rapid rise of the FTAC has illustrated the tensions within the Los Angeles entertainment business, launching a political campaign in just eight weeks and drawing 3,000 protesters to a rally last month. Ms Nagel, who worked in Queensland filming The Island of Dr Moreau, said the FTAC had 3,500 members.

Yet the Australian industry is confident of withstanding the new measures. "It's still very cost effective to shoot in Australia because of our dollar," said Mr David Pratt, the Australian film trade commissioner in Los Angeles. "I still think when you look at the exchange rate savings, the tax credits in Australia and Canada will still be better than what's available in LA.'

And Mr Pratt said The Matrix was Australia's best advertisement for business. In a dozen meetings he has held with producers over the past fortnight, all mentioned The Matrix for its low costs and high quality of production.